The Groceries Code Adjudicator (GCA), Christine Tacon, has launched an investigation into Co-operative Group Limited’s practices relating to delisting and the introduction of benchmarking and depot quality control charges.
GCA noted that the decision came after having formed a “reasonable suspicion” that the retailer may have broken the Groceries Supply Code of Practice over a period from early 2016 to at least summer 2017.
Tacon has come to the conclusion that an investigation is “necessary to fully understand the extent to which the Code may have been broken and the root causes of the issues as well as their impact on suppliers”.
As GCA now needs more information from direct suppliers and others to determine whether the Code has been broken, and if so, what further to take, Tacon has called for evidence to be submitted by 4pm on 3rd May 2018.
The investigation will focus on paragraph 16 of the Code (Duties in relation to De-listing) and paragraph 3 of the Code (Variation of Supply Agreements and terms of supply).
When considering the issues, the GCA will also be looking at paragraph 2 of the Code (Principle of fair dealing); in particular, the investigation will consider the extent, scale and impact of practices that may have resulted in suppliers being de-listed with no, or short, fixed notice periods unilaterally imposed by the group without due consideration of published GCA de-listing guidance.
The focus will be in relation – but not limited – to decisions taken between summer 2016 and summer 2017, as part of a project called ‘Right Range; Right Store’.
It will also consider the extent, scale and impact of practices which may have resulted in the introduction of charges without reasonable notice to suppliers, including the introduction of depot quality control and benchmarking charges to suppliers, especially those with fixed cost contracts.
In addition, Tacon will consider the retailer’s Code-related training for its buyers and the culture contributing to its approach to Code compliance.
Tacon commented: “I have previously escalated my concerns with the Co-op as part of my published collaborative approach.
“However, after carefully considering all the information submitted to me, I have decided that an investigation is necessary so I can fully understand the extent to which the Code may have been broken and the root causes of the issues that have been raised with me.”
Co-op has acknowledged that it has “fallen short” and noted it has been “discussing the two issues raised with the GCA for some months”.
It announced that it has taken “decisive steps” to ensure the fair treatment of all its suppliers.
The action taken includes steps to strengthen its systems and processes for the future, retraining of 450 commercial colleagues in the operation of the Code and writing to all of its 1,500 direct suppliers to seek information on any delisting decisions that they believe may have been taken without appropriate consultation.
The retailer is also reviewing every case where a supplier was charged for benchmarking and quality control, and as a result, 110 suppliers have been refunded a total of approximately £500,000.
Jo Whitfield, CEO of Co-op Food, stated: “We care deeply about our relationships with our suppliers and we are very sorry that in these two areas we have failed to live up to our usual high standards.
“We are already addressing the issues with the GCA and our suppliers and we hope the investigation will help bring to light any additional cases so that we can put these right as quickly as possible.”